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Archive for Thursday, July 9, 2009

Kansas Corporation Commission considering narrowing gap on Westar rates

July 9, 2009, 9:22 a.m. Updated July 9, 2009, 5:49 p.m.

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— Kansas regulators are considering a big step toward equalizing rates for customers of the state’s largest electric company, reviving an old political debate, but with a twist.

Westar Energy Inc. charges different rates in its northern and southern divisions. The company wants to place the same charges for some items — such as transmission costs — on all customers’ bills.

The Kansas Corporation Commission is holding informational meetings over the next week in three cities, including one Thursday in Pittsburg. It plans to have hearings later this month and in August and has until late October to rule.

Westar formed when two utilities merged in the 1990s. The Wichita-based company that served what is now Westar’s southern division had much higher rates than the Topeka utility serving what became the northern division. The state agency has been narrowing the gap, and Westar believes the rates are close enough to allow consolidation.

The issue roiled Kansas politics a decade ago, when rates were much farther apart, Wichita officials pushed for “parity” and Topeka officials objected. Now some Wichita officials are nervous about consolidating Westar’s rates, and the local school district opposes Westar’s plan.

“We’re finally at that point where rates are, on balance, fairly comparable,” said David Springe, chief attorney for the corporation commission, the state agency that represents residential customers and small businesses in utility rate cases. “The question is, do we finish the job or not?”

The turnabout has come about partly because of the national debate over regulating emissions of carbon dioxide and other greenhouse gases linked to global warming. It’s also tied to the state’s only nuclear power plant, Wolf Creek, about 55 miles south of Topeka.

Kansas Gas & Electric Co., the corporate predecessor of Westar’s southern division, owned 47 percent of the nuclear plant, which began generating electricity in 1985. Kansas Power & Light, later Westar’s northern division, didn’t have a stake in nuclear power, opening its huge coal-fired Jeffrey Energy Center northwest of Topeka in 1978.

Rates for former Kansas Gas & Electric customers reflected the more expensive investment in nuclear power after the merger. In 2000, according to Westar, southern customers paid an average of 8.3 cents per kilowatt hour of electricity, 32 percent more than the 6.3 cents paid by northern customers.

But now Westar’s 366,000 northern division customers pay an average of 8 cents per kilowatt hour, and the 313,000 southern customers, 7.8 cents, a gap of only 0.3 percent. For residential customers, it’s even narrower — an average monthly bill of $77.28 in the north, versus $77.31 in the south, the state agency says.

Westar says if the agency approves its proposal, consumers won’t see an immediate change in what they pay for using the same amount of electricity, nor will the utility generate additional revenues.

But some skeptics believe the northern division’s rates inevitably will rise as federal energy policy penalizes coal-fired power plants.

State Rep. Jim Ward, a Wichita Democrat, said the debate was different a decade ago, when it was about which Westar consumers would finish paying off Wolf Creek’s construction.

“Since we have almost paid for Wolf Creek, we shouldn’t have to give away the benefit,” Ward said. “Down the road, we know the cost of coal will go up.”

Sarah Loquist, assistant general counsel for Wichita’s schools, said a followup decision by the state agency on consolidating the rest of Westar’s rates could come quickly — meaning customers’ costs might remain stable only for a few months. The Wichita district spends about $6 million a year on electricity.

Loquist believes that once Westar’s current plan is approved a full consolidation is inevitable.

But Dick Rohlfs, Westar’s director of retail rates, said it operates as a single company — except for its rates. As for consolidating them, he said, “You’re so close now, maybe it’s the time to do it.”

Springe also said it’s likely Wolf Creek will need upgrades as it ages, and that Westar would have to make other capital investments that could be charged to southern customers’ rates.

“It’s going to be a rough balance,” he said.

Comments

Bill Griffith 4 years, 9 months ago

Or make Westar funnel more investment in energy efficiency for homeowners to the Wichita area so those customers can save a larger increment on their electric bill.

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SouthWestKs 4 years, 9 months ago

Westar Energy North customers need to feel the pain for a while before the rates are equalizied, like they made the South customers!!

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